Studying at public universities in Germany is beneficial in terms of cost as they don’t charge any tuition fee. Private institutions charge a minimal fee, which is easily manageable. Accommodation is the only expense that you need funds for.
The scenario for studying in the US and the UK is precisely the opposite. You can end up spending a minimum of Rs. 15 Lakh on course fees only. The same can shoot to more than a crore at some universities. Most Indians, however, prefer these countries as they provide ample opportunities.
Hence, your income and savings can take a beating if your child is planning to enrol in a foreign institute. In such situations, an education loan for abroad studies can help you keep your savings intact and take care of such expenses with ease. Being secured, these loans come with a low rate of interest and longer tenures.
Here is how you can get secured education loans:
- Have The Necessary Documents Ready
There are minimal documents that you need to submit to avail a loan. Some of these include documents of the property you want to mortgage, Aadhaar or PAN, address proof (telephone bill, electricity bill, water bill, gas bill, any KYC documents with your permanent address, etc.), and bank account statement for the last 3 months.
Employed applicants have to provide their latest salary slips and income tax returns in addition to the documents mentioned above.
You only have to provide these few documents when applying for Loans Against Property for education from NBFCs like Bajaj Finserv.
They also provide pre-approved offers that make the process of availing loans hassle-free and help you save time. These offers are available on secured credits like home loans, unsecured loans like business loans, personal loans, and on numerous other financial products.
- Fulfil The Required Age Criteria
You have to be within the age bracket of 33 and 58 years if you are employed and between 25 and 70 years if you are self-employed to apply for a study loan for abroad.
These two are the only requirements that lenders ask for when you apply for secured education loans. Make sure to follow a step by step guide to apply for a loan against property to avail funds for higher education.
You can also keep the following points in mind to improve your chances of approval:
- Ask For The Right Loan Amount
Whether a lender approves your loan or not depends on the loan to value (LTV). The LTV is the ratio between your loan amount and the current market value of the property you are mortgaging.
RBI allows an LTV of up to 90% if the loan is not more than Rs. 30 Lakh. In other cases, the LTV is never more than 85%.
Now, a high LTV makes the loan risky for a financial institution. The company may not be able to recover the lost amount by liquidating your property if you default on your loan. Hence, they might charge you a high rate of interest or reject your application.
You have to ask for the right amount when applying for a secured education loan to make sure none of the above happens.
- Lower Your Monthly Expenses
Lenders may reduce the loan amount you have applied for or reject your application if your monthly expenses are considerably high. They check your debt-to-income ratio or Fixed Obligation to Income Ratio (FOIR) to check the same.
Ideally, your monthly expenses should not be more than 50% of your income. A lower debt-to-income ratio makes it easier to pay your new loan EMIs and lowers the chance of defaulting.
- Improve Your Credit Score
A good credit score is not one of the necessary requirements for a secured study loan for abroad. However, a CIBIL score of 750 or more can improve your chances of approval. You can also avail lower interest rates and other benefits if you have a high credit score. Taking care of these points will make you more eligible for a secured education loan.
Now that you know how to Apply for education loan but before availing the loan much check the eligibility criteria for it and also compare the available options and pick the right lender. Also, make sure to avail the tax benefits on your loan. Lastly, part-prepay or foreclose the loan when you have the necessary funds and save on interest.